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Global Regulatory Developments in Digital Assets: December 2024Executive Summary: Global Regulatory Developments in Digital Assets - December 2024

There was significant regulatory activity in December 2024. Globally, on establishing comprehensive frameworks for digital assets, central bank digital currencies (CBDCs), and AI in finance.


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Key Highlights:


  • Europe led the way in implementing the Markets in Crypto-Assets (MiCA) regulation. This included setting grandfathering periods for existing providers, defining acquisition rules, strengthening supervision, and promoting investor protection. The Digital Operational Resilience Act (DORA) also progressed.

  • The UK focused on crypto-asset regulation and consumer protection. A discussion paper outlined plans for admissions, disclosures, and a market abuse regime, while the FCA emphasised consumer duty.

  • Hong Kong introduced a bill to regulate stablecoins. This aims to address potential risks and ensure financial stability in the region.

  • Australia updated its guidance on digital assets as financial products and services. This reflects the evolving nature of the market and the need for updated regulatory oversight.

  • The US held hearings on financial innovation, exploring emerging technologies' potential benefits and challenges in the financial sector.

  • Discussions continued internationally on CBDCs. The BIS, national banks, and the BCBS explored their role, relationship with fast payment systems, and implications for financial stability. The use of AI in finance was also addressed.


December's regulatory developments demonstrate a global trend towards greater oversight and clarity in the digital asset space. These efforts aim to balance innovation with consumer protection and financial stability.


Europe

MiCA Implementation Takes Center Stage:

The European Commission, European Supervisory Authorities (ESAs), and the European Banking Authority (EBA) were heavily involved in finalising and adopting numerous Delegated Regulations and reports related to MiCA implementation. These covered a broad spectrum of topics, including:

  • Grandfathering Periods: Member States determined grandfathering periods for existing crypto-asset service providers (CASPs) to transition to the new MiCA regime. This provides a timeframe for existing players to adapt and comply with the new requirements.

  • Acquisition of Qualifying Holdings: Delegated Regulations were adopted specifying the information needed to assess proposed acquisitions of qualifying holdings in CASPs and issuers of asset-referenced tokens (ARTs). This aims to ensure transparency and stability in the ownership and control of key players in the crypto-asset market.

  • Reporting and Supervision: The EBA finalised guidelines on reporting templates under MiCA, aiding competent authorities in their supervisory duties regarding issuers' compliance. This strengthens oversight and enforcement capabilities.

  • Sustainability and Market Abuse: The European Commission adopted a Delegated Regulation on sustainability information under MiCA, promoting responsible and environmentally conscious practices. A final report on draft technical standards for detecting and preventing market abuse was also released, aiming to maintain market integrity.

  • Investor Protection: Final reports were published on guidelines concerning investor protection, including reverse solicitation, ensuring adequate safeguards for consumers.

  • Classification of Crypto-Assets: A final report on guidelines for classifying crypto-assets as financial instruments clarifies the regulatory treatment of different types of digital assets.

  • Technical Standards: Delegated Regulations and Implementing Regulations were adopted, specifying technical standards for white papers, order book records, and other aspects of the crypto-asset market. This promotes standardisation and interoperability.


DORA Implementation Progresses:

Progress was made on implementing the Digital Operational Resilience Act (DORA), with reports on dry run exercises and adopting an Implementing Regulation for a standard template for registering information. This strengthens the operational resilience of financial entities in the face of digital disruptions.


Digital Markets Explored:

The EBA released a report on tokenised deposits, examining their potential benefits and risks. Discussions continued on the role of permissionless blockchains in financial services, exploring their potential to enhance innovation and efficiency.


United Kingdom

Crypto-Asset Regulation in Focus:

A discussion paper on admissions, disclosures, and a market abuse regime for crypto-assets was released. This indicates the UK's intention to establish a comprehensive regulatory framework for the crypto-asset market.


Consumer Duty Emphasized:

The Financial Conduct Authority (FCA) outlined focus areas and findings on firms' approaches to consumer duty board reports, emphasising the importance of consumer protection in financial services.


Hong Kong

Stablecoins Bill Introduced:

Hong Kong introduced a bill to regulate stablecoins to address potential risks and ensure financial stability.


Australia

Digital Assets Guidance Updated:

The Australian Securities and Investments Commission (ASIC) released a consultation paper proposing updates to its guidance on digital assets as financial products and services. This reflects the evolving nature of the digital asset market and the need for updated regulatory guidance.


United States

Financial Innovation Discussed:

The House Committee on Financial Services held a hearing on financial innovation, exploring the potential benefits and challenges of emerging technologies in the financial sector.


International

CBDC Exploration Continues:

The Bank for International Settlements (BIS), national banks (NatWest, Bank of England), and the Basel Committee on Banking Supervision (BCBS) published numerous papers and reports exploring the role of CBDCs in the financial system, their relationship with fast payment systems, and their implications for economic stability.

AI in Finance Addressed:

The Financial Stability Institute (FSI) published insights on the challenges of regulating artificial intelligence (AI) in the financial sector. The report highlighted the need to carefully consider potential risks and benefits.


Conclusion

December's regulatory developments underscore the increasing global focus on creating comprehensive and robust frameworks for digital assets, CBDCs, and AI in finance. These efforts aim to foster innovation while mitigating risks and ensuring consumer protection. As the digital asset ecosystem evolves, ongoing regulatory engagement and adaptation will be crucial to promoting responsible innovation and maintaining financial stability.



 
 

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The posts listed on the 'What we think' webpages are our interpretation of regulatory developments we have been reading about. They should not be considered legal, regulatory or other advice. Contact us if you want to understand the impact of public policy, regulation and governance changes for you.

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